One question we’ve been hearing a lot lately is: “How does it work when I sell my house and have a gain on that investment?”
The first thing to consider is whether you’ve lived in the home for at least two of the past five years. These two years don’t need to be consecutive; as long as you’ve met this residency requirement, you can exclude up to $250,000 in gains as a single filer or up to $500,000 as a married couple. This exclusion is a major benefit, and for many homeowners, it prevents capital gains tax entirely.
If your gains exceed these thresholds, don’t forget that the cost of capital improvements can help offset the taxable amount. The IRS allows certain types of home improvements to be deducted, so it’s a good idea to keep records of any qualifying expenses during your ownership.
Another strategy involves converting an investment property into a primary residence. By living in the property for at least two years, you may become eligible for the same exclusion. Without this residency, the sale of an investment property wouldn’t qualify for the exclusion, leading to a higher tax bill.
These strategies highlight the importance of thoughtful planning when selling your home or managing real estate investments. If you have questions about your specific situation, our advisors at Summit Wealth Group are here to help. Don’t hesitate to reach out—we’d be happy to guide you through the process.